Inflation slows, strengthening the case for rate cut

Prices for goods and services rose less than expected in September, the Bureau of Labor Statistics reported Friday.

The Consumer Price Index (CPI) increased 0.3% from August, bringing annual inflation to 3%, below economists’ forecast of 3.1%. Core inflation, which excludes food and energy, rose 0.2% monthly and 3% annually—signaling easing price pressure.

Gasoline prices jumped 4.1%, the biggest driver of the month’s increase, while food prices edged up 0.2%. Shelter costs, making up one-third of the CPI, rose just 0.2% and were up 3.6% from last year. 

New vehicle prices gained 0.8%, but used car prices fell 0.4%. Energy costs rose 2.8% year over year, while food was up 3.1%.

This CPI report—the only key data released during the government shutdown—gives the Federal Reserve its final inflation reading before next week’s meeting. Markets now expect the Fed to cut rates by 0.25 percentage points, from 4% to 4.25%.

Economists say softer inflation supports another rate cut, as the Fed balances slowing job growth and trade concerns with its 2% inflation target.

However, prices for items and services have gone up considerably compared to last year. Coffee prices climbed 19% and beef prices 15% in the 12 months to September.

Getting a car repaired is 12% more expensive than it was last year.

Meanwhile, experts are concerned about price increases in the coming months due to tariffs, as businesses will offset the cost of import duties by passing them onto consumers.